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[Thai Economics Library | Archives| Currency Crisis 2007| Entrepreneurs]
July 20, 2010

Thailand's palm oil industry faces challenges in development

By Jon Fernquest

palm oil production compared

Thailand's palm oil industry and the challenges it faces in catching up with world leaders Indonesia and Malaysia was the subject of a detailed analysis in the Bangkok Post this week.

Today's article begins after the vocabulary.

(Table above compares Thailand with market leaders from previous article).

palm oil - an edible plant oil used in cooking and also to make biodiesel fuel for cars (SeeWikipedia)
challenges - difficult problems that must be solved to achieve goals
catching up - reaching the same level (same market share, efficiency, revenue, etc)
market share - percentage or fraction of a market's customers who buy your product, percentage of a market that a company controls

Economics
ASIA FOCUS

Thai oil palm industry sets standard

19/07/2010
Greg Lowe

But benefits of local innovations are limited by problems with inefficiency and drought.

Thailand's oil palm industry is leading the way for regional biopower projects and is more sustainable than operations in Indonesia and Malaysia which have faced global pressure for devastating old-growth forest and taking a wrecking ball to farming communities, experts say.

benefits - goods things that can happen from an activity ผลประโยชน์
local - in the country or local area that you live in ท้องถิ่น
inefficiency - now working well as it could, could do more work with given resources อย่างไม่มีประสิทธิภาพ
drought - a period of time when there is very little rain and water available ความแห้งแล้ง (See Wikipedia)
sustainable - able to be successfully continued for a long time แบบยั่งยืน ที่ดำเนินต่อไป
global - throughout the world ทั่วโลก
pressure - trying to force someone to do something
devastating - very harmful and damaging

But while the local sector is breaking ground with its renewable energy projects, inefficiency, drought and poor farming methods are dragging on output.

Palm oil accounts for about 37% of world vegetable oil output of some 136 million tonnes. Thailand is the world's third-largest producer of palm oil, producing 1.8 million tonnes in 2009-10, after Indonesia with 20.75 million and Malaysia at 18.5 million, according to US Foreign Agriculture Service figures.

Indonesia and Malaysia together account for 87% of world palm oil production.

sector - a part of the economy (public sector = government, private sector = all businesses, household sector = families and consumers, banking sector,...) ภาค (เศรษฐกิจ) (See Wikipedia)
renewable energy - "energy which comes from natural resources such as sunlight, wind, rain, tides, and geothermal heat, which are renewable (naturally replenished)" also "small hydro, modern biomass, wind, solar, geothermal, and biofuels" (See Wikipedia)
dragging - making move more slowly
X accounts for Y% of Z - X is Y% of Z
figures - statistics, numbers

Last year, Thailand had about 3.9 million rai of oil palm plantations, of which 3.2 million were cultivated. This produced 8.6 million tonnes of fresh fruit bunches (FFB) and some 1.46 million tonnes of crude palm oil (CPO). Krabi, Surat Thani and Chumphon provinces are the three major palm oil producing provinces, accounting for 843,750 rai, 829,375 rai and 694,031 rai of cultivated area respectively, according to the Agriculture Ministry. 

Thailand's palm oil industry slowed last year due to lower market capitalisation and a drop in both the volume and price of CPO produced.

plantations - large farms with many workers growing commodity crops such as rubber, sugar, or coffee
cultivated - prepared land and grew crops on it ซึ่งเตรียมเพื่อเพาะปลูก
market capitalization - the total value of a company or industry's stock shares (determined by their selling price on the stock exchange)
volume - the quantity or amount of something

The volume is presumed to gain a bit (this year), say by 10%, while the price is also stronger because of biodiesel demand," said Piyathida Sukchan, an executive director at Lam Soon (Thailand), a Stock Exchange of Thailand-listed firm that has the largest plantations and the third-largest palm milling capacity in the country.

Drought caused by the El Nino phenomenon is a negative factor expected for the third and fourth quarters this year. Even though the volume of palm oil is expected to expand because of new planted areas, the oil yield will decrease [due to the effects of the drought ].

presumed - assumed, experts believe it will happen
biodiesel - fuel for diesel engines made of renewable organic raw materials such as palm oil, cassava, or sugar as opposed to oil and natural gas (See Wikipedia)
demand - the need and desire to buy goods and services by households and businesses
executive - the highest level managers in a company
firm - a business or company บริษัม
capacity - the amount of something that can be produced ความสามารถในการ (ผลิต)
phenomenon - something that exists, especially something which is unusual or interesting ปรากฏการณ์
negative - bad ที่เป็นด้านลบ
factor - a fact or situation which influences the result of something ปัจจัย
expected - believe will happen คาดว่า (จะเกิดขึ้น)
expand - to become larger ขายตัวออกไป
yield - an amount of something produced ผลผลิต

To improve the efficiency would require strong support from the government in terms of well-managed systems and regulations following good agricultural practice as has been successfully done in Malaysia.

A report produced for GTZ, the German government's international sustainable development agency, last year highlighted inefficiency in Thailand's palm oil sector as a major challenge to the industry's development.

improve - to make better ทำให้ดีขึ้น
efficiency - waste little time, energy and resources in doing a task (minimize time, energy and resources in performing a task) (See glossary) การทำงานอย่างมีประสิทธิภาพ คุ้มค่าเวลาและใช้พลังงานหรือต้นทุนในการผลิตน้อย เพื่อให้ได้ผลผลิตมาก
support - help สนับสนุน
regulations - official rules that control the way that things are done ระเบียบปฏิบัติ, ข้อบังคับ
practice - a way of a common work task การปฏิบัติ
good agricultural practice - the methods for growing crops that have been proven to be the best methods (either scientifically or by experience through trial and error)
international - between countries ระหว่างประเทศ
development - the gradual growth and formation of something
highlighted - emphasized; stressed; made more noticeable ที่เน้นย้ำ
challenge - something that needs a lot of skill, energy and determination to deal with or achieve สิ่งท้าทาย

It said the local industry's oil extraction rate (OER) of 17% was "far below the rate achieved in many other countries". Improving the yield by three percentage points could bring in additional revenue of 1.5 billion baht a year in Krabi province alone.

Thailand has faced these problems for the past two decades due to the harvesting of unripe fruits and the use of inappropriate planting materials, issues that could be overcome by improving farmer education and quality control systems, as well as by introducing a grading system for oil palm fruit based on ripeness and the OER, said the report.

rate - the level or speed at which something happens or changes, or the amount or number of times it happens or changes in a particular period อัตรา
extraction - taking one out of another thing (here: taking oil out of the palm plant)
oil extraction rate (OER) - a standard measure of how much palm oil is taken out of the palm plant (Read detailed paper on oil extraction rate in Malaysia)
revenue - income from taxes or business activities รายได้
decades - periods of ten years เป็นสิบๆปี
harvesting - collecting a crop from the fields การเก็บเกี่ยว
inappropriate - not appropriate, not acceptable
issues - subjects that need to be considered ประเด็น
overcome - to succeed in controlling or dealing with something ต่อสู้อุปสรรคจนสำเร็จสำมารถดำเนินการต่อไปได้

Krisada Chavananan, chairman of the Thai Palm Oil Millers Association and managing director of Vichitbhan Palm Oil and Vichitbhan Plantation, which have Thailand's largest milling capacity, says drought over the past two years could drag the OER down by two percentage points to 15% in 2010.

Using a different system for measuring output that was based on the oil yield per rai rather than the quantity of fresh fruit bunches harvested would better highlight inefficiencies and help the industry improve the yield and quality of its output, he said.

mill - a factory for processing raw crops and turning them into a packaged product that can be sold
milling capacity - the amount of raw crops that a mill can handle during a period of time
drag - to pull something or someone along with difficulty ลาก
drag - slowing something down
highlight - show something more clearly, making something easier to see 

In general, the production of palm oil is fairly inefficient. While in Malaysia and Indonesia supply of oil palm far outstrips demand, the situation on the ground in Thailand is much different. Not only is the local industry less regulated than in neighbouring countries, but there are also "more mills than fruit", said Dr Krisada.

In Thailand competition in buying (palm) fruit is very strong, so we need to be much more efficient and incorporate new technological developments much faster than in Indonesia and Malaysia," he said.

inefficient - not efficient (could produce more from the resources it has)
efficient - produces a lot from few resources, doing a task with no waste of time, money or energy
incorporates - add or include
X incorporates Y - X includes Y, X adds Y to X

Thailand has about 60 palm oil mills and crushing facilities, most of which are located in the southern provinces where the majority of the fruit is grown. Over 90% of plantations in the country are owned by small farmers, which is the opposite to Malaysia and Indonesia, where corporations own 90% of the production facilities and plantations. 

Most plantations are cultivated on disused plots or old rubber farms or rice paddies rather than tearing down virgin or old-growth forest as is common in Malaysia and Indonesia.

crush - press hard to break into small pieces
facilities - the buildings, equipment and services provided for a particular purpose สิ่งอำนวยความสะดวก
majority - more than 50 percent of a group ส่วนมาก, เสียงส่วนมาก, คนส่วนใหญ่
corporations - a large company (registered with the government as separate legal entity, owned by many shareholders) (See Wikipedia)
plots - pieces of land
disused plots - pieces of land that are not used anymore
rubber - a material that can undergo elastic deformation under stress and return to its previous size without permanent deformation
common - people do it a lot

These two factors mean the local industry is more sustainable in social and environmental terms.

The social impact of the industry here is completely different to that in Indonesia or Malaysia," said Dr Krisada.

However, Lam Soon's Ms Piyathida said the local ownership structure was a "major weakness" in terms of the industry's overall efficiency.

But while the local sector's output may lag behind that of Indonesia and Malaysia, it punches above its weight in developing renewable energy projects.
factors - one of the things that effects a situation or event ปัจจัย
impact - an effect or influence ผลกระทบ
lag - move slower than others
punches above its weight - does more than you would expect given its size and experience (original meaning: a small boxer can fight and beat a large boxer)

Thailand is leaps and bounds ahead of Indonesia and Malaysia in terms of ease of doing clean energy investments, providing a stable and attractive feed in tariff and fast tracking licensing," said Austin Arensberg, a Bangkok-based business development manager at the Nollen Group, whose Prime Energy Investment fund invests in a variety of renewable energy technologies in biogas and biomass from palm oil waste.

leaps and bounds ahead of - very far ahead of
ease - the ability to do something easily
stable - not changing frequently and not likely to suddenly become worse มั่นคง
stable - firmly fixed, not likely to move or change a lot, not likely to fail คงที่ ไม่เปลี่ยนแปลง
attractive - pleasant to look at น่าสนใจ
feed - things coming into a place (examples: a newsfeed, an information feed)
attractive - worth having or doing
tariff - tax
fast track - processing official paperwork and applications quickly 
licensing - getting official permission from the government to do a certain activity
fund - to provide money for something ให้เงินทุน
variety - many different types of things or people ความหลากหลาย
biogas - a gas and biofuel produced by the biological breakdown of organic matter in the absence of oxygen, one type of biogas is "produced by anaerobic digestion or fermentation of biodegradable materials such as biomass, manure or sewage, municipal waste, and energy crops." (See Wikipedia) ก๊าซชีวภาพ
biomass - "a renewable energy source, is biological material derived from living, or recently living organisms, such as wood, waste, (hydrogen) gas, and alcohol fuels. Biomass is commonly plant matter grown to generate electricity or produce heat" (See Wikipedia)

One other area that people tend to forget is that many of the companies that build biogas and biomass clean power facilities in Thailand are Thai and they have many opportunities now to export their expertise to Indonesia and Malaysia, where projects are still only beginning to pop up. We are excited to see many Thais in the business community beginning to do work in far-flung provinces in Indonesia and Malaysia.

tend - to be likely to behave in a particular way or have a particular characteristic มักจะ
clean power - non-polluting energy and power generation
power - energy in the form of electricity produced in large quantities and used to operate lights, machines, and heating
opportunities - situations in which it is possible to do what you want or need to do
expertise - special skills or knowledge from study or practical experience ความถนัด
pop up - appear in different places
business community - the group of all business people in an area 
far-flung - very far away

(Source: Economics, ASIA FOCUS, Thai oil palm industry sets standard, 19/07/2010, Greg Lowe, link)

Posted by Jon Fernquest at 05:37 PM | | Comments (0)


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